The National Assembly’s plenary session passed a partial amendment to the Electronic Financial Transactions Act (the “Amendment”), designed to improve the system for payment gateway services (“PG Services”), on November 28, 2025, and the Amendment was promulgated on December 16, 2025.
The Amendment incorporates the improvements announced by the government – namely, the “Additional Measures for the WeMakePrice and TMON Incident and System Improvement Plan” dated August 7, 2024, and the “Plans to Improve the Payment Gateway System” dated September 9, 2024 (Link). The Amendment consolidated and adjusted three bills, including the bill for a partial amendment to the Electronic Financial Transactions Act (the “EFTA”) proposed by National Assembly member Minkuk Kang (Link), into an alternative bill prepared by the National Policy Committee. After the Legislation and Judiciary Committee revised certain provisions, the National Assembly passed the Amendment at the plenary session.
The amended EFTA was promulgated on December 16, 2025, and is scheduled to enter into force one year later, on December 17, 2026. However, the provisions concerning corrective measures for non-compliance with the management guidance standards by electronic financial business entities and corrective measures for non-compliance with the standards for separate management of pre-paid funds by pre-paid business will take effect immediately on the promulgation date, December 16, 2025.
The Amendment aims to clarify the definition of PG Services and strengthen regulations on electronic financial business entities, including payment gateway service providers (“PGs”), with a focus on fund management obligations. Specifically, the key provisions of the Amendment include (i) clarifying the definition of PG Services, (ii) establishing legal measures to protect funds to be settled, (iii) raising the minimum capital requirement for PGs, (iv) introducing obligations for PGs to settle sales proceeds within the designated settlement period, (v) ensuring the effectiveness of management guidelines for electronic financial business entities, (vi) requiring electronic financial business entities to obtain approval for, or register, any changes in their majority shareholders, and (vii) imposing criminal penalties for misappropriation of settlement or prepaid funds.
These key provisions are further explained below:
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Clarifying Definition of PG Services
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Definition of PG Services: The Amendment defines PG Services as those “receiving, providing and settling payments on behalf of third parties when payments for goods or services are made between such parties through electronic payment means.” However, this definition excludes “receiving, providing and settling payments on behalf of third parties as ancillary services in the course of engaging in a sales brokerage business or other businesses under the Act on Consumer Protection in Electronic Commerce”
The current version defines PG Services as “any services to transmit or receive payment settlement information when purchasing goods or using services by electronic means, or to execute as an agent or intermediate the settlement of prices thereof.” In comparison, the Amendment excludes “any services to transmit or receive payment settlement information” from the definition of PG Services, thereby clarifying that the core function of PG Services is to act as an agent to settle payments between third parties. At the same time, it excludes from the scope of PG Services any settlement of payments on behalf of third parties, conducted as ancillary services in the course of other businesses, such as a sales brokerage business, even if such settlement concerns payments between third parties.
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Scope of applicability: According to the Amendment, the EFTA is not applicable to a business entity that receives, provides and settles payments on behalf of third parties as ancillary services to other businesses under specified laws (other than the EFTA), including the Act on Fair Transactions in Large Retail Business or the Act on the Consumer Protection in Electronic Commerce. This intends to further clarify that “the settlement of payments on behalf of third parties conducted as ancillary services in the course of other businesses, such as a sales brokerage business” is excluded from the scope of PG Services.
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Establishing Legal Measures to Protect Settlement Funds
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Management by third parties: PGs must have all settlement funds[1] managed by third-party fund management agencies (i.e., banks) through deposits, trusts or payment guarantee insurances. These settlement funds must be handled securely. If PGs violate the foregoing and fail to manage the settlement funds through third parties, they may be subject to an administrative fine of up to KRW 50 million or suspension of business for up to six months.
At least 60% of the settlement funds must be managed by third parties starting from the effective date of the Amendment. This percentage increases to 80% starting from the first anniversary of the effective date of the Amendment, and to 100% from the second anniversary of the effective date (December 17, 2026) of the Amendment.
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Protection of settlement funds: Settlement funds under third-party management cannot be seized or used for set-offs. PGs are also prohibited from transferring or using these funds as securities, except in unique circumstances such as mergers or business transfers. Furthermore, merchants, users, or others with claims on settlement funds managed by third parties will have preferential payment rights over the settlement funds under third-party management.
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Raising Minimum Capital Requirement for PGs
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The Amendment raises the minimum capital requirement for PGs to ensure that they have the necessary human resources and physical facilities to provide large-scale PG Services. Specifically, it establishes a new threshold of “persons intending to offer PG Services with a total quarterly electronic financial transaction amount exceeding KRW 30 billion.” PGs meeting this threshold must hold capital in “the amount prescribed by Presidential Decree,” which will be over KRW 1 billion. The specific capital requirement will be determined by the Presidential Decree. Even in the case of previously registered PGs, if they continue to exceed the above threshold for at least two quarters, they must file a report to the Financial Services Commission (the “FSC”) and meet the capital requirement within the period[2] set by the FSC.
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Introducing Obligations to Settle Sales Proceeds Within Designated Settlement Period
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PGs must settle and pay the sales proceeds they receive within the settlement period specified in the relevant PG agreements, unless there is a justifiable reason not to do so. Upon failing to meet this obligation, the FSC may issue a corrective order. Non-compliance with such order may result in an administrative fine of up to KRW 50 million.
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Ensuring Effectiveness of Management Guidelines for Electronic Financial Business Entities
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Currently, the FSC can currently issue a correction request only to electronic financial business entities that have obtained “permission” to engage in their business. The Amendment expands this authority, allowing the FSC to request corrections necessary for management improvement even to “registered” electronic financial business entities (including PGs) if they do not meet management guidelines. The FSC will also have the power to impose penalties for non-compliance with its requests, such as request for correction, business suspension and cancellation of registration, depending on the severity of non-compliance.
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Requiring Electronic Financial Business Entities to Obtain Approval for, or Register, Changes in Majority Shareholders
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An electronic financial business entity will be required to obtain approval for, or register, any change in its majority shareholders with the FSC within 15 days of such change. Failure to obtain approval for, or register, such a change or where such approval or registration is obtained by fraud or other improper means, may result in the cancellation of the electronic financial business registration.
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Imposing Criminal Penalties for Misappropriation of Settlement Funds or Prepaid Funds
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As the Amendment amends the definition of PG Services and the scope of applicability under the EFTA, some business entities previously required to register as PGs will no longer fall under this category. For example, an e-commerce business entity that engages in mail order brokerage business (as regulated under the Act on the Consumer Protection in Electronic Commerce) and receives and settles payments on behalf of third parties as its ancillary services, will no longer be subject to the EFTA. However, it should be noted that online brokerage platforms exceeding a certain size may still be regulated under the proposed amendments to the Act on Fair Transactions in Large Retail Business announced by the Korea Fair Trade Commission (Link), and other regulations. Given that the Amendment is expected to bring significant changes to the regulatory environment for PGs and relevant industries, such as e-commerce, business operators in these sectors will need to be thoroughly prepared to navigate the evolving regulatory landscape.
Meanwhile, the Amendment stipulates that PGs must manage settlement funds separately, in a manner similar to how prepaid funds concerning electronic prepayment means are handled. Accordingly, PGs must review their fund management systems to ensure compliance with the separate management requirement. Additionally, the Amendment generally strengthens regulations for electronic financial business entities, covering areas such as management guidelines and changes of majority shareholders. Therefore, electronic financial business entities should be fully prepared to ensure compliance with these strengthened regulations.
[1] Settlement funds: Funds temporarily held and managed for refunds to PGs or users (including cases where payments or refunds are made to other financial companies or electronic financial business entities, etc.).
[2] The Regulations on Supervision of Electronic Finance currently in force stipulate that the period shall be within six months from the date on which a report is filed with the FSC.
[Korean Version]
